SUPERSTAR CEO'S - "BAD COMPANY, THE STRANGE CULT OF THE CEO", BY GIDEON HAIGH

Aurum Books, 2004

Most of us have become accustomed to the idea that the Chief Executives of large public companies are high profile public figures whose exploits, successes and failures feature large in the pages of the financial press. The tendency to lionise or vilify the actions of CEO's is strongly reinforced by the financial markets, and the supposed alignment of the interests of top managers with those of 'shareholders' has been the fuse that ignited the uncontrolled explosion in top executive pay.

How refreshing, then, it is to come across a book that places the role of the CEO in sharp perspective. Mr Haigh's book is relatively small, about 150 pages, but manages to pack into those pages a most amusing, penetrating and erudite dissection of what he calls the 'Strange Cult of the CEO'.

By way of flavour the book starts with a gripping vignette:

"He was dressed casually, almost carelessly, like his troops, and he wore his hair combed off his face in the style of Hollywood producers and Wall Street financiers. He was assiduously fit; his eyes were ice blue and his gaze was steady, and he spoke in clipped, flat, supremely confidently tones. Everyone at Enron knew that Jeff was twice as smart as they were - twice as smart as they could ever hope to be - and they hung on his every word".
The subject of this eulogy was of course, Jeff Skilling, CEO of Enron, rated at one time by Fortune magazine as 'America's most innovative corporation', a man who now faces a jail sentence. A friend recently pointed out a similar romantic attachment to highwaymen in the eighteenth century.

'Bad Company' traces the history of large corporations and their managers through the lives and works of such industrial pioneers as Henry Ford, Frederick Taylor and Alfred Sloan. As the processes of ownership, financing and investment were progressively separated from those of managing the corporation, so did the theory and practise of management develop - especially in the United States.

In the 1950's and 1960's, the professional manager hardly featured in the minds of the public. Most top managers were anonymous figures, hardly visible in the wider world and often detached from their own organisations by the trappings of power and class.
Then, in the 1970's, things began to change. As in most change processes, there were pioneers. Haigh pinpoints Lee Iacocca, who was, to use popular vernacular, 'parachuted in', to the crisis-ridden Chrysler Corporation.
Iacocca is described as being obsessed with his own image, 'Claiming credit for every success, blaming Japan, OPEC or the US government for every setback'.

He was obsessed with appearing on the front page of Time magazine, and was bruited as having presidential ambitions; only, "Running Chrysler has been a bigger job than running the country. I could handle the national economy in six months!"
An admiring public seemed to agree with Iacocca's assessment of himself and bought seven million copies of his autobiography.
To cap it all, he set new standards for executive compensation, declaring, "Whatever you have, it's never enough", grabbing every perquisite within reach.

By the 1980's the cult of the industrial hero was in full swing - other authorities have pointed out that this period coincided with the beginnings of mass participation in the equity markets, with growing public interest in business.
Public appetites were fed by the press, and both press and public were disinclined to contemplate the finer complexities of running large organisations - better by far to follow the fortunes of the 'stars' who led them.
So, the cult of the superstar CEO was born and sustained by stories about such larger than life figures as Al 'Chainsaw' Dunlap and the ubiquitous Jack Welsh of GE.
Haigh observes that CEO's have become a branded product, supported by a huge industry comprising cheerleaders from business education, the business press and the financial markets - all of whom sustain the illusion in the minds of the public of super-beings performing heroic acts, often in dramatic ways.

The important thing is to create a good impression. Professor Moss-Kantor Of Harvard Business School is quoted as observing that a good impact will be created by positive appearances in the dimensions of personality, looking good, aggressiveness, executive stature and promotability. She goes on to observe that the interesting thing about these five ingredients is that they do not include professional competence. Henry Mintzberg comments that it is now very possible to reach the top "Without ever getting hands on the clay of real industrial experience".

Obsession with appearances leads to one of the grossest errors of our day - the False Attribution Error. This can take many forms, for example, the person who was appointed to a key role "Because he once worked for Jack Welsh", and therefore had to be a very competent hard man.

Haigh mentions the various notions about what CEO's actually do, including acting as conductor of the orchestra, quoting Hans Keller, "The conductor's existence is essentially superfluous, and you have to attain a high degree of musical stupidity to find watching the beat, or the conductor's inane face, easier for the purpose of knowing how and when to play than simply listening to the music" Julius Feifer of the New York Orpheus Chamber said, "We don't need somebody waving their arms for us to understand a phrase". Haigh says "We await the first CEOless corporation......."

Like most brands, heroic CEO's need brand promotion - this comes in the forms of heroic pay, the performance of heroic acts, especially when it comes to M&A deals, creative accounting and, of course, a large public relations industry which will assiduously feed the media with the 'right' image-building stories.

CEO compensation receives particular attention - a few quotes will give a flavour of Haigh's stances:

• "They (performance bonuses), are a curious concept: one receives a salary for doing one's job, and, after some occult calculus, a bonus for doing it well, as though excellence and endeavour were not factored into preliminary estimates".
• "Nowadays, this has blossomed into the self-contradictory idea of the 'guaranteed bonus' - an innovation of compensation consultants that can only have been inspired by the Queen in Alice in Wonderland (Everyone has won and all must have prizes).

Stock options as a means of rewarding managers comes in for similar treatment, "The most surprising aspect of getting bosses to think like owners is not that it encourages dishonesty, but that it seems to encourage very little else".

Through the book, Haigh coolly and amusingly debunks contemporary popular conceptions about the roles, powers, and real impact of high profile CEO's, concluding that most of them represent a n illusion: "Investors have continued to show a touching belief in the ability of their CEO's powers of transubstantiation", and; "Investors are like the bad scientist who insists on repeating the experiment until he gets the right result". He derides the popular "Faith in the Power Of One - fortified by several million (share) Options".

Towards the conclusion of the book, he asks why we continue with the ridiculous cult of the all-powerful CEO, concluding that it is enormously resilient and analogous to s uperstitious beliefs such as those about ghosts. On this subject, Doctor Johnson said, "All the argument is against it, but all belief for it".

Some readers may find Haigh's conclusions a bit strong - but the fact is that he is supported by most serious research about managerial excellence. Good CEO's - if those are people who have led durably successful companies, are, according to all respectable research, not cast in the superhero mould at all, but instead are closely bonded with their companies and the people in them.
Even Jack Welsh did not create the huge success that is GE, he is simply one of a long line of highly capable CEO's, all of whom made their contributions - along with thousands of other employees.

The current habit of lionising individuals ignores the fact that running successful companies is a team game - to hype the Power of One is misleading and demeaning of the invisible majority who are the real sources of corporate success.